How will Romney or Obama's proposed tax plans affect you?

When politicians speak about the economy, they almost always talk about how they are going to cut taxes to stimulate "growth."

In this year's presidential election, the Republican nominee Mitt Romney has promised not only to cut federal income taxes, but to also cut a whole host of other investment taxes.

On the other side of the aisle, President Obama promises to keep taxes low for most Americans and to raise them only for the well-off.

Current Tax Rates

Before we start dissecting the two tax plans, let's first establish the context in which both men are making their tax promises.

First, federal taxes are generally very low. I know you don't want to hear that, but it is true.

The nonpartisan Congressional Budget Office calculated that the average effective tax rate Americans paid to the federal government in 2009 was 17%, making it the lowest rate paid in 30 years.

Since taxes have not gone up significantly since 2009, we can assume that the rate is still very low.

That takes into account all the money that a person pays to the federal government, including income tax, investment tax, and a whole myriad of other taxes from the alternative minimum tax to the estate tax.

Here are the current US federal income tax rates:

Tax Bracket

Married Filing Jointly

Single

10% Bracket

$0 – $17,400

$0 – $8,700

15% Bracket

$17,400 – $70,700

$8,700 – $35,350

25% Bracket

$70,700 – $142,700

$35,350 – $85,650

28% Bracket

$142,700 – $217,450

$85,650 – $178,650

33% Bracket

$217,450 – $388,350

$178,650 – $388,350

35% Bracket

Over $388,350

Over $388,350

National Debt

The second thing that you should keep in mind is that the US government isn't raising enough taxes to cover its bills.

Washington is, on average, spending a trillion – with a T –more dollars than it is taking in every year. All this overspending in the last decade has added up, contributing to a national debt of more than $16 trillion.